European Insights

Share:

Luxury and Fashion – How a stable industry can be built on constant change

03 June, 2019

Magnificence in obscurity is equally vain with a Sun-dial in the Grave.
Samuel Johnson

Luxury when excessive is the source of many ills; but is in general preferable to sloth and idleness; which would commonly succeed in its place.
David Hume

Imagine a world where your city’s legislators are so concerned about the potential cultural impact of the long-peaked shoes appearing from nearby Swabia that they outlaw them and you have in one sense transported yourself back to Nuremberg in the middle of the 15th Century. Initially concerned with extravagant wedding and funeral gifts, a wave of Sumptuary Laws[1] swept over Europe between 1300 and 1600 and increasingly targeted prohibition of the wearing of certain clothing.

Nothing can offer as clear a litmus test as to the power of something than the desire that it should be controlled by law. Clothing signified status and almost all the Sumptuary Laws were intended to solidify existing hierarchical structures. In Nuremberg again, silk, furs and pearl could only be worn by aristocrats, princes of the church or certain respected professions, whilst gold threads were further reserved for knights and Doctors of Law. Commerce brought change, especially through the medium of fashion, and reactionary forces pushed against this early form of modernity in an attempt to recapture the stability and inertia of the medieval era. Fines were often imposed but imprisonment and hangings were not unknown.

And yet the importance of clothing and fashion continues to be underestimated and demeaned as a form of expression. It appears to belong in the category of art and its ownership confers pleasure and meaning, two of the most powerful human instincts. The manufacture of fabric and clothing is an ancient technology and its impact on culture is as important as other newer technologies and yet it is often considered as something frivolous and inconsequential.

It is interesting to note that the British and the Dutch were fairly restrained in terms of imposing controls. After some initial enthusiasm under Henry VIII whereby an Act was passed in 1532-3 'for Reformacyon of Excesse in Apparayle', Elizabeth I made little headway with several clothing proclamations and later in her reign they were routinely stymied by the House of Commons. Meanwhile the Dutch never had to step away from Sumptuary Laws because they didn't introduce any in the first place.

The whys and wherefores of these attitudinal differences are no doubt fascinating and complex but a number of historians agree on the outcome: Britain and Holland were more relaxed about certain kinds of cultural change and in terms of allowing people to fashion themselves, and trade, perhaps partly because of this, flourished. The wearing of light cottons and bright colours across a broad swathe of the population began to make an appearance in many parts of Europe in the 1790's, a full century after adoption in Britain and Holland.

Little in terms of the power of fashion has changed over the ages even if the nature of the emulative gaze has altered. Whilst all eyes were on the French Court in the Ancien Régime before the Revolution of 1789, now the concentration is predominantly on the celebrities and designers who are empowered to craft the trends. The modern era may be more various and dispersed but the logic remains the same. Those who say this form of consumption is new are demonstrating a willed historical illiteracy whilst those who complain at the emptiness of it miss the power and meaning of uniforms, often whilst wearing their own distinctive and elaborate badges of office.

Europe, perhaps partly as a consequence of its near-forgotten difficult relationship with clothing, is the global leader in terms of couture and fashion (four of the top five luxury companies by sales are European.) This cannot be dismissed as trivial because it supports a high-growth, highly profitable industry with, for the most part, the very unusual business advantage of being able to consistently put up prices. European soft power in this context is effectively channelled into the substantial Chinese market which is undergoing a secular growth trend [2] as standards of living continue to improve. Notwithstanding the longer term trends, shorter term support is evident in the form of the RMB 2 trillion tax cut (equivalent to over 2% of projected 2019 GDP) announced in the March annual session of the National People's Congress as China continues to shift emphasis away from infrastructure and towards consumption.

European advantages in terms of monopolising these remarkable changes appear assured for some time and it is obvious that the growth of this industry owes much to a relaxation of laws and attitudes. This would appear to be the end of the story until one learns that John Calvin, the protestant reformer, introduced Sumptuary Laws in Geneva in the early 1540's. His area of emphasis was to ban the wearing of jewellery. Watches, on the other hand, were considered to be a practical instrument and were not covered by the law.

The unemployed jewellers therefore switched to watch making. They migrated north to the Jura region where the Swiss watch-making industry, another area of exceptional European strength, was soon born. This story offers a neat inversion of Hume's concern that sloth and idleness would commonly succeed in the place of luxury and that the latter should be allowed in order to combat the former. Laws come and go; human ingenuity and cultural change as well as the drive to get ahead appear to be constants. As Coco Chanel said in, perhaps unknowing, homage to Dr Johnson: 'The most courageous act is still to think for yourself. Aloud.' Fashion and luxury are here to stay and for this, investors should be thankful.


[1] A useful analysis of Sumptuary Laws can be found in Frank Trentmann's excellent book 'The Empire of Things'.

[2] China is estimated to make up over 30% of global fashion spending.

Back to articles

Last Week's Insight

WANT TIMELY NEWS AND UPDATES STRAIGHT TO YOUR INBOX?

Subscribe to our newsletter here

 

European Equity Strategies

Learn more
This has been provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC Global Asset Management Inc. (RBC GAM Inc.). In Canada, this website is provided by RBC GAM Inc. (including Phillips, Hager & North Investment Management). In the United States, this website is provided by RBC Global Asset Management (U.S.) Inc., a federally registered investment adviser. In Europe, this website is provided by RBC Global Asset Management (UK) Limited, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this website is provided by RBC Investment Management (Asia) Limited, to professional, institutional investors and wholesale clients only and not to the retail public.  RBC Investment Management (Asia) Limited is registered with the Securities and Futures Commission (SFC) in Hong Kong.  Any funds/ strategies referenced in this website are not registered in, nor may be sold, issued or  offered in Hong Kong, China, Singapore, Korea or Taiwan and this website does not contemplate the marketing, offer, issue or sale of any funds/strategies in these jurisdictions.
RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC GAM Inc., RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Investment Management (Asia) Limited, and BlueBay Asset Management LLP, which are separate, but affiliated subsidiaries of RBC. 
This website has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the above-listed entities in their respective jurisdictions. Additional information about RBC GAM may be found at www.rbcgam.com.

This website is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. The investment process as described in this website may change over time. The characteristics set forth in this website are intended as a general illustration of some of the criteria considered in selecting securities for client portfolios. Not all investments in a client portfolio will meet such criteria. RBC GAM takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when printed. RBC GAM reserves the right at any time and without notice to change, amend or cease publication of the information. 
Any investment and economic outlook information contained in this website has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions. 

All opinions and estimates contained in this website constitute RBC GAM›s judgment as of the indicated date of the information, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates and market conditions are subject to change. 
Return estimates are for illustrative purposes only and are not a prediction of returns. Actual returns may be higher or lower than those shown and may vary substantially over shorter time periods. It is not possible to invest directly in an unmanaged index.
A note on forward-looking statements 

This website may contain forward-looking statements about future performance, strategies or prospects, and possible future action. The words “may,” “could,” “should,” “would,” “suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties about general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
® / TM Trademark(s) of Royal Bank of Canada. Used under licence. 
© RBC Global Asset Management Inc. 2019